Combined flows to China, India, Turkey hit lowest since October
(Bloomberg) — Russia’s oil exports made a small gain last week, but not by enough to prevent what appears for now to be a downtrend in the nation’s shipments to a diminished group of buyers.
Aggregate flows of Russian crude rose by 197,000 barrels a day, or 8%, in the seven days to Jan. 6. Pacific shipments were up by 200,000 barrels a day from the previous week, while those from the Arctic gained by 143,000 barrels a day, more than offsetting a decline in volumes leaving the Black Sea.
The increase didn’t prevent the country’s four-week average, which smooths out peaks and troughs in what are noisy weekly data, from decreasing for the fourth straight week. And it is apparent that those countries that provided a lifeline for Moscow are starting to look less supportive than they were last year. That could spell trouble for Russia, which hasn’t managed to diversify its pool of buyers since Europe all but halted purchases early last month.On a four-week average basis, the total seaborne flow to Jan. 6 was down by more than 500,000 barrels a day from a plateau level of about 3 million in the second half of last year, dropping below 2.5 million for the first time since Bloomberg began compiling the data at the start of 2022. This measure will almost certainly rise in the coming week, as a mid-December, weather-related slump that saw weekly flows collapse by more than half, falls out of the calculation.
The volume of crude on vessels heading to China, India and Turkey, the three countries that emerged as the only significant buyers of displaced Russian supplies, plus the quantities on ships that are yet to show a final destination, fell for the fourth straight time in the four weeks to Jan. 6 to average 2.31 million barrels a day. That’s down by 140,000 barrels a day from the period to Dec. 30, and the lowest in 10 weeks.
With most of the ships yet to show destinations likely to end up in India or China, the slump in flows to Turkey was particularly dramatic. Imports from Russia, which rose to almost 400,000 barrels a day in September, slumped to just 21,000 barrels a day over the past four weeks, vessel-tracking data monitored by Bloomberg show. That’s even lower than they were before Moscow’s troops invaded Ukraine last February.
Inflows to the Kremlin’s war-chest from crude export duties plunged. While lower flows and an easing of crude prices have played a part in that drop, so too has a change in the formula used to calculate duty rates, as the country continues its long shift away from taxing exports by increasing the burden on production.
The European Union’s import ban on Russia crude has led to much longer voyages for shipments, with journeys now taking an average of 31 days from Baltic ports to India, compared with just seven days from the same terminals to Rotterdam and about half that to Poland. That’s putting more pressure on the dwindling fleet of ships whose owners are willing to haul Russian cargoes.
The country is increasingly reliant on its own ships and a so-called “shadow fleet” of usually older ships owned by small, often unknown companies that have sprung up in recent months. European-owned tankers can still carry Russian crude, as long as it is sold at a price below a $60 a barrel cap, introduced at the same time as the import ban. But few are now doing so.
There has also been a resurgence in ship-to-ship transfers of cargoes in the Mediterranean, with cargoes either being combined onto larger vessels or shifted from ice-class tankers onto other vessels in order to free up those vessels needed for operations in the Baltic in the winter months.That has been visible both off the Spanish north African city of Ceuta and off the Greek coast near Kalamata. The VLCC Lauren II has completed the transfer of three 100,000-ton cargoes at Ceuta and the Sao Paulo took two before heading through the Suez Canal. Lauren II is now riding too deep in the water to pass through the canal and is likely to head around Africa to Asia.
Elsewhere, shuttle tankers that haul Russia’s Sokol crude are waiting much longer than usual to transfer cargoes to other ships off the South Korean port of Yeosu, reducing the number of cargoes they are able to lift each month. Tankers hauling Russian crude are becoming more cagey about their final destinations. Vessels carrying almost 25 million barrels of Russian crude, the equivalent of 880,000 barrels a day of exports, left port showing no clear final destination in the four weeks to Jan. 6. It remains likely that many leaving Baltic and Black Sea terminals will begin to signal Indian ports once they pass through the Suez Canal.
Crude Flows by Destination:
On a four-week average basis, overall seaborne exports fell by 159,000 barrels a day. At 2.481 million barrels a day, four-week average flows are the lowest since Bloomberg began compiling Russian crude exports in detail at the beginning of last year. Shipments to Europe have dried up almost completely, while those to Asia also slipped. Exports declined even as pipeline supplies to Germany halted from the beginning of the year, freeing up as much as 300,000 barrels a day more crude for delivery to coastal export terminals.
All figures exclude cargoes identified as Kazakhstan’s KEBCO grade. These are shipments made by KazTransoil JSC that transit Russia for export through Ust-Luga and Novorossiysk.
The Kazakh barrels are blended with crude of Russian origin to create a uniform export grade. Since the invasion of Ukraine by Russia, Kazakhstan has rebranded its cargoes to distinguish them from those shipped by Russian companies. Transit crude is specifically exempted from the EU sanctions.
-
Asia
Four-week average shipments to Russia’s Asian customers, plus those on vessels showing no final destination, which typically end up in either India or China, edged lower fell for a second week in the period to Jan. 6. While the volume heading to India appears to have slumped, history shows that most of the cargoes on ships initially showing no final destination end up there.
The equivalent of more than 480,000 barrels a day was on vessels showing destinations as either Port Said or Suez, or which have already been or are expected to be transferred from one ship to another off the South Korean port of Yeosu. Those voyages typically end at ports in India and show up in the chart below as “Unknown Asia” until a final destination becomes apparent.
The “Unknown” volumes, running at almost 400,000 barrels a day in the four weeks to Jan. 6, are those on tankers showing a destination of Gibraltar, Malta or no destination at all. Most of those cargoes go on to transit the Suez Canal, but some could end up in Turkey. An increasing number are being transferred from one vessel to another in the Mediterranean for onward journeys to Asia.
-
Europe
Russia’s seaborne crude exports to European countries fell to 146,000 barrels a day in the 28 days to Jan. 6, with Bulgaria the sole European destination. These figures do not include shipments to Turkey.
A market that consumed more than 1.5 million barrels a day of short-haul crude, coming from export terminals in the Baltic, Black Sea and Arctic has been lost almost completely, to be replaced by long-haul destinations in Asia that are much more costly and time-consuming to serve.
No Russian crude was shipped to northern European countries in the four weeks to Jan. 6.
Exports to Mediterranean countries continued to fall, slipping to 21,000 barrels a day on average in the four weeks to Jan. 6 setting a new post-invasion low. Flows to the region fell for a ninth week.
Turkey was the only destination for Russian seaborne crude into the Mediterranean, but flows there are also dwindling. Turkey was one of the countries that boosted imports after Moscow’s troops invaded Ukraine, and it is surprising to see flows falling so fast now, as the country is not a party to the EU’s import ban and had been seen as a key market for the country’s crude after European buyers shunned Russian crude.
Flows to Bulgaria, now Russia’s only Black Sea market for crude, fell for a second week, slipping to 146,000 barrels a day. Bulgaria secured a partial exemption from the EU ban, which should support inflows now that the embargo has come into force.
Flows by Export Location
Aggregate flows of Russian crude rose by 197,000 barrels a day, or 8%, in the seven days to Jan. 6. Increases in Pacific and Arctic shipments were partly offset by a decline in volumes leaving the Black Sea, which were down by 146,000 barrels a day. Shipments from the Baltic were unchanged from the previous week.
Figures exclude volumes from Ust-Luga and Novorossiysk identified as Kazakhstan’s KEBCO grade.
Export Revenue
Inflows to the Kremlin’s war chest from its crude-export duty fell by $52 million, or 48%, to $57 million in the seven days to Jan. 6, while the four-week average income fell by $22 million to $88 million. The big drop reflects a change in the way duty is calculated that came into effect at the start of January.
The January duty rate is $2.28 a barrel, based on an average Urals price of $57.5 a barrel, according to figures from the Russian Ministry of Finance. The drop from $5.91 a barrel in December is due in part to a change in the formula used to calculate duty rates for 2023, with the country moving away from taxing exports and shifting the burden to production as part of its multi-year tax maneuver. The plan sees export duty phased out entirely by the start of 2024.
Origin-to-Location Flows
The following charts show the number of ships leaving each export terminal and the destinations of crude cargoes from the four export regions.
A total of 26 tankers loaded 19.7 million barrels of Russian crude in the week to Jan. 6, vessel-tracking data and port agent reports show. That’s up by 1.3 million barrels, or 8%, from the previous week. Destinations are based on where vessels signal they are heading at the time of writing, and some will almost certainly change as voyages progress. All figures exclude cargoes identified as Kazakhstan’s KEBCO grade.
The total volume on ships loading Russian crude from Baltic terminals was unchanged from the previous week, but still about 300,000 barrels a day down from the levels seen for much of 2022.
Shipments from Novorossiysk in the Black Sea fell back in the period to Jan. 6 after two weeks of gains. Almost half of the volume lifted is on tankers yet to signal a destination.
Arctic shipments jumped to their highest in two months, with three suezmax tankers leaving from Murmansk during the week. All are heading to Asia via the Suez Canal.
Flows from the Pacific rose to a four-week high, with shipments of Sokol crude resuming after no cargoes were loaded in the final week of 2022.
All Sokol cargoes are shuttled to an area off the South Korean port of Yeosu, where they are transferred to other ships for onward delivery. Shuttle tankers are now often waiting for several days before transfers take place, reducing the number of cargoes they can load. These cargoes are the ones with unknown destinations, with all recent ones eventually heading to India or China.
Note: This story forms part of a regular weekly series tracking shipments of crude from Russian export terminals and the export duty revenues earned from them by the Russian government.
Note: All figures exclude cargoes owned by Kazakhstan’s KazTransOil JSC, which transit Russia and are shipped from Novorossiysk and Ust-Luga as KEBCO grade crude.
Note: Data on crude flows can also be found at {DSET CRUDE }. The numbers, which are generated by a bot, may differ from those in this story.
Note: Aggregate weekly seaborne flows from Russian ports in the Baltic, Black Sea, Arctic and Pacific can be found on the Bloomberg terminal by typing {ALLX CUR1 }.
–With assistance from Sherry Su.
More stories like this are available on bloomberg.com
©2023 Bloomberg L.P.